Reynolds American, Inc. (RAI), Altria Group Inc (MO): E-cigarettes vs. Tobacco, Where Should You Invest?

Competition

Data from Morningstar and Financial Visualizations on June 13

Currently priced above $90, Philip Morris International Inc. (NYSE:PM) continues to provide investors with strong intrinsic performances as its revenue and net income growth overshadow those of its American competitors. The company is taking advantage of having untapped markets in which to allocate resources.

For Altria and Reynolds American, Inc. (NYSE:RAI), the problem is not only having a single market in which to operate, but also a highly knowledgeable market which is increasingly shunning cigarettes. In the American e-cigarette market, the two firms will have to contend with Lorillard Inc. (NYSE:LO), which has already launched its own e-cigarette with an aggressive advertisement campaign that has allowed it to gain a majority share of the market.

Final thoughts

The American tobacco market and impending rise of the e-cigarette have a lot of risk and volatility up ahead. Keeping in mind the tough competition among Altria Group, Reynolds American, Inc. (NYSE:RAI) and Lorillard Inc. (NYSE:LO)  in the American market, we might see a price war for e-cigarettes much similar to the one witnessed in 2001 and 2002.

Steering clear of the e-cigarette trouble, Philip Morris International Inc. (NYSE:PM) continues to explore developing markets and offers its enhanced cigarette range in these countries to make up for the lost sales from the developed world. In my opinion, Philip Morris offers better value, strong fundamentals and risk free growth potential. Philip Morris is a solid buy.

Marina Avilkina has no position in any stocks mentioned. The Motley Fool owns shares of Philip Morris International.

The article E-cigarettes vs. Tobacco: Where Should You Invest? originally appeared on Fool.com and is written by Marina Avilkina.

Marina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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